UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) PAPA JOHN'S INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 61-1203323 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) number) 2002 Papa John's Boulevard Louisville, KY 40299-2367 (Address of principal executive offices) (502) 261-7272 x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the qu ...

Financial Data and Key Metrics Changes - For Q2 2022, global systemwide sales reached $1.2 billion, reflecting a 2.6% increase in constant currency [22] - Consolidated revenue increased by 1.5% to $522.7 million, driven largely by commissary revenues linked to higher commodity costs [24] - Adjusted consolidated operating income was $40.4 million, down from $48 million in Q2 2021, with adjusted operating margins decreasing to 7.7% from 9.3% [25][26] - Diluted earnings per share were $0.70 compared to a loss of $2.30 last year, with adjusted earnings per diluted share at $0.74, down from $0.93 [30] Business Line Data and Key Metrics Changes - Comparable sales in North America rose by 1.4% across franchise restaurants but fell by 1.5% in company-owned restaurants [23] - International comparable sales declined by 8%, primarily due to challenges in the UK, although other international markets performed well [16][23] Market Data and Key Metrics Changes - The UK market faced significant challenges, including record high inflation and the end of government stimulus, impacting sales negatively [16] - Other international markets, excluding the UK, remained healthy, contributing positively to overall sales growth [17] Company Strategy and Development Direction - The company is focused on maintaining a balanced approach to optimize short-term results while investing for long-term growth [11] - New store openings and significant development deals are ongoing, with plans to open between 280 and 320 net new units for the full year [21] - The company aims for a global net unit growth of 6% to 8% annually from fiscal 2023 through 2025 [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's resilience and ability to navigate the current economic challenges, emphasizing the value proposition of pizza compared to other dining options [10][11] - The expectation is for commodity costs to remain elevated in the near term but to normalize heading into 2023, which will improve margins [28][35] - The company anticipates continued positive comparable sales in North America for the second half of the year, despite expected softness in the UK [34] Other Important Information - The company has a strong liquidity position with over $500 million in cash and available borrowing [32] - A 20% increase in the third quarter dividend to $0.42 per share has been declared, reflecting confidence in the company's financial health [33] Q&A Session Summary Question: Clarification on North America comps outlook - Management confirmed expectations for North American comp sales to remain positive in the back half of the year [41] Question: Marketing strategy in response to consumer spending - The company maintains a value strategy without leading with national deep discounts, focusing on localized promotions and loyalty programs [43][44] Question: Strategic plan for the UK market - Management highlighted the unique challenges in the UK, including VAT tax implications, and emphasized the need to transfer successful U.S. capabilities to the UK [47][48] Question: Changes in consumer behavior and potential levers - Management noted a return to seasonality due to increased travel, impacting sales, but expressed optimism for the second half of the year [56][57] Question: Staffing and retention improvements - Staffing has improved, with better recruiting and retention levels, although challenges remain [62][63] Question: Drivers of comps and personalization in promotions - Management is confident in upcoming menu innovations and enhanced data utilization for targeted promotions [70][72] Question: Development guidance and international market performance - The company remains confident in development opportunities outside the UK, with positive performance in other international markets [82]

Restaurant Operations - As of June 26, 2022, Papa John's operates 5,571 restaurants, including 519 company-owned and 5,052 franchised locations across 49 countries[97]. - The company expects to open between 280 and 320 net new restaurants in 2022, with a long-term goal of 1,400 to 1,800 new locations by the end of 2025[99]. - Papa John's reported a total system-wide restaurant sales growth of 2.6% for Q2 2022, compared to 12.2% in Q2 2021[108]. Financial Performance - Total revenues for Q2 2022 were $522.7 million, a 1.5% increase from $515.0 million in Q2 2021[111]. - Operating income for Q2 2022 was $38.9 million, representing 7.4% of total revenues, down from 8.7% in Q2 2021[111]. - Total revenues increased by $38.6 million, or 3.8%, to $1.1 billion for the six months ended June 26, 2022, compared to the prior year[113]. - Domestic Company-owned restaurant sales decreased by $23.2 million, or 5.9%, for the six months ended June 26, 2022, compared to the prior year[114]. - North America franchise royalties and fees increased by $4.0 million, or 6.1%, for the six months ended June 26, 2022, compared to the prior year[115]. - North America commissary revenues increased by $57.5 million, or 15.5%, for the six months ended June 26, 2022, primarily due to higher pricing[118]. - International revenues decreased by $5.6 million, or 7.8%, for the six months ended June 26, 2022, primarily due to lower UK commissary revenues[119]. - Operating income decreased by $38.2 million to $53.3 million for the six months ended June 26, 2022, compared to the prior year[128]. - Adjusted net income attributable to common shareholders for the six months ended June 26, 2022, was $60.7 million, down 7.3% from $65.9 million in the same period of 2021[145]. Costs and Expenses - Total costs and expenses were approximately $1.0 billion, or 93.9% of total revenues for the six months ended June 26, 2022, compared to $935.3 million, or 91.1% for the prior year[122]. - General and administrative expenses were $110.6 million, or 10.4% of revenues for the six months ended June 26, 2022, compared to $103.7 million, or 10.1% for the prior year[127]. - Inflationary pressures have led the company to implement strategic price increases to offset rising costs, while maintaining a focus on premium product offerings[103]. Special Items and Charges - The company recorded a one-time, non-cash charge of $17.4 million related to the suspension of franchisee support in Russia due to geopolitical issues[101]. - Special items included a one-time, non-cash provision of $14.6 million related to the conflict in Ukraine for the six months ended June 26, 2022[127]. - The company recorded a one-time, non-cash charge of $14.6 million related to accounts receivable due to the conflict in Ukraine[133]. Cash Flow and Financing - Cash flow provided by operating activities was $45.6 million for the six months ended June 26, 2022, a decrease of 64.3% from $128.0 million in the corresponding period of 2021[149]. - Free cash flow for the six months ended June 26, 2022, was $14.8 million, significantly lower than $100.1 million for the same period in 2021[163]. - Total cash used in financing activities was $50.7 million for the six months ended June 26, 2022, compared to $142.9 million in the same period of 2021, reflecting a decrease of 64.7%[152]. - Outstanding debt as of June 26, 2022, was $545.0 million, consisting of $400.0 million in senior notes and $145.0 million under the revolving credit facility[153]. Market and Economic Conditions - Inflationary pressures have led to increased food and labor costs, which may continue to impact profitability[142]. - The company is exposed to labor cost increases, food costs, and sustained higher operating costs due to supply chain disruptions and inflation[167]. - The company anticipates potential delays in new store openings both domestically and internationally due to various risks[167]. - The company has not historically hedged its exposure to foreign currency fluctuations, which can adversely impact revenues and cash flows[171]. Shareholder Returns - The company declared a second quarter dividend of $0.42 per common share, totaling approximately $14.9 million, to be paid on August 26, 2022[161]. - The company repurchased 452,000 shares at an average price of $94.56 per share for a total cost of $42.8 million during the three months ended June 26, 2022[158]. Pricing and Commodity Costs - The average block price for cheese is projected to be $2.091 for the full year 2022, compared to an actual average block price of $1.705 for 2021[174]. - The actual average block price for cheese in Quarter 2 of 2022 was $2.296, significantly higher than the $1.680 in Quarter 2 of 2021[174]. - The company has pricing agreements with some vendors, including forward pricing agreements for a portion of cheese purchases, but remains exposed to ongoing commodity volatility[172].

Financial Data and Key Metrics Changes - In Q1 2022, global system-wide sales increased by 5.3% in constant currency to $1.3 billion, following a 26.6% increase in the previous year [8][28] - Comparable sales rose by 1.9% in North America and 0.8% internationally, compared to prior year gains of 26.2% and 23.2% respectively [8][28] - Consolidated revenue increased by 6% to $542.7 million, driven by positive comparable sales and unit growth [28] Business Line Data and Key Metrics Changes - North America comparable sales were up 2.8% across franchisee restaurants but down 1.2% in company-owned restaurants, reflecting localized economic differences [28] - International comparable sales increased by 0.8%, with strong performance in Asia and Latin America, partially offset by weaker results in Europe, particularly the UK [29] Market Data and Key Metrics Changes - The company opened 62 net new units worldwide in Q1, contributing approximately half of the system-wide sales gains [9][23] - The company expects to raise its outlook for unit growth in 2022 to 280 to 320 net units, up from a previous estimate of 260 to 300 [26][27] Company Strategy and Development Direction - The company is focusing on a differentiated strategy that includes menu innovation, digital engagement, and premium positioning to drive sustainable growth [10][15] - The launch of new products, such as the New York Style crust and Epic Pepperoni Stuffed Crust, is aimed at enhancing customer engagement and driving sales [11][12] - The company is also expanding its loyalty program, Papa Rewards, to target price-sensitive customers while maintaining premium offerings for less price-sensitive segments [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current inflationary environment and maintain positive comparable sales in the second half of 2022 [25][36] - The company anticipates that North America comparable sales will be slightly positive in Q2 and continue to be positive for the remainder of the year [25][36] - Management highlighted the importance of strategic pricing actions to offset rising commodity costs while retaining customer momentum [17][38] Other Important Information - The company reported a GAAP operating income of $14.4 million for Q1 2022, down from $46.9 million a year ago, primarily due to special items related to refranchising and international sanctions [30][31] - Adjusted earnings per diluted share rose to $0.95 from $0.91 a year ago, reflecting the impact of share repurchases and tax benefits [34] Q&A Session Summary Question: Labor availability and third-party delivery challenges - Management acknowledged ongoing staffing challenges but expressed confidence in their ability to meet customer demand through partnerships with third-party delivery services [42][43] Question: Margin outlook and EPS growth - Management confirmed expectations for slightly lower margins due to inflation but maintained a positive outlook for EPS growth in the mid to high single digits [49][50] Question: Development guidance and international growth - Management indicated that approximately two-thirds of the new unit growth will be international, with a strong pipeline for future development [59][60] Question: Pricing strategy and consumer sentiment - Management noted that franchisees had implemented price increases earlier, and the company is now aligned with similar pricing strategies [65][66] Question: Competitive landscape and aggregator partnerships - Management emphasized their first-mover advantage in online ordering and partnerships with aggregators, which have been pivotal in maintaining competitive positioning [85][86]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents Papa John's unaudited condensed consolidated financial statements for Q1 2022 and Q1 2021, detailing financial position, performance, and cash flows, with notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (March 27, 2022 vs. December 26, 2021) | Metric (in thousands) | March 27, 2022 (in thousands) | December 26, 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------- | :---------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $885,626 | $885,704 | $(78) | -0.01% | | Total Liabilities | $1,088,747 | $1,052,664 | $36,083 | 3.43% | | Total Stockholders' Deficit | $(208,444) | $(172,458) | $(35,986) | 20.87% | - Assets held for sale increased significantly to **$19.3 million** as of March 27, 2022, from zero at December 26, 2021, primarily due to the refranchising of a 90-restaurant joint venture[8](index=8&type=chunk) - Long-term debt, less current portion, net, increased by **$47.4 million**, from **$480.7 million** at December 26, 2021, to **$528.1 million** at March 27, 2022[8](index=8&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 27, 2022 vs. March 28, 2021) | Metric (in thousands, except per share) | March 27, 2022 (in thousands) | March 28, 2021 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Total Revenues | $542,692 | $511,746 | $30,946 | 6.05% | | Total Costs and Expenses | $517,097 | $464,884 | $52,213 | 11.23% | | Refranchising and impairment loss | $(11,160) | $0 | $(11,160) | N/A | | Operating Income | $14,435 | $46,862 | $(32,427) | -69.19% | | Net Income attributable to the Company| $10,494 | $33,883 | $(23,389) | -69.03% | | Diluted Earnings Per Common Share | $0.29 | $0.82 | $(0.53) | -64.63% | | Dividends Declared Per Common Share | $0.350 | $0.225 | $0.125 | 55.56% | - Operating income significantly decreased by **69.2%** due to a **$11.2 million** refranchising and impairment loss and increased operating costs[10](index=10&type=chunk) - Diluted EPS decreased by **$0.53**, or **64.6%**, primarily due to the refranchising and impairment loss and higher operating expenses[10](index=10&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income Highlights (Three Months Ended March 27, 2022 vs. March 28, 2021) | Metric (in thousands) | March 27, 2022 (in thousands) | March 28, 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------------------------- | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Net income before attribution to noncontrolling interests | $11,427 | $35,283 | $(23,856) | -67.61% | | Other comprehensive income, net of tax | $655 | $2,197 | $(1,542) | -70.19% | | Comprehensive income attributable to the Company | $11,149 | $36,080 | $(24,931) | -69.10% | - Other comprehensive income, net of tax, decreased by **70.2%**, driven by foreign currency translation adjustments and interest rate swaps[14](index=14&type=chunk) [Condensed Consolidated Statements of Stockholders' Deficit](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Deficit) Condensed Consolidated Statements of Stockholders' Deficit Highlights (Three Months Ended March 27, 2022 vs. December 26, 2021) | Metric (in thousands) | March 27, 2022 (in thousands) | December 26, 2021 (in thousands) | Change (in thousands) | % Change | | :---------------------------- | :---------------------------- | :------------------------------- | :-------------------- | :------- | | Total Stockholders' Deficit | $(208,444) | $(172,458) | $(35,986) | 20.87% | | Treasury Stock (at cost) | $(832,603) | $(806,472) | $(26,131) | 3.24% | | Retained Earnings | $181,124 | $183,157 | $(2,033) | -1.11% | - The total stockholders' deficit increased by **$36.0 million**, primarily due to the acquisition of Company common stock for **$32.7 million** and cash dividends of **$12.7 million**, partially offset by net income[15](index=15&type=chunk) - Accumulated other comprehensive loss improved from **$(9.97) million** to **$(9.32) million**, driven by a decrease in net unrealized foreign currency translation loss and interest rate swap losses[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights (Three Months Ended March 27, 2022 vs. March 28, 2021) | Metric (in thousands) | March 27, 2022 (in thousands) | March 28, 2021 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Net cash provided by operating activities | $25,394 | $63,217 | $(37,823) | -59.83% | | Net cash used in investing activities | $(8,315) | $(6,299) | $(2,016) | 32.01% | | Net cash used in financing activities | $(6,787) | $(16,080) | $9,293 | -57.79% | | Cash and cash equivalents at end of period | $80,669 | $171,272 | $(90,603) | -52.90% | - Net cash provided by operating activities decreased by **$37.8 million**, primarily due to unfavorable working capital changes, including a decrease in accrued expenses and accounts receivable[21](index=21&type=chunk) - Net cash used in investing activities increased by **$2.0 million**, mainly due to higher purchases of property and equipment[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Basis of Presentation](index=9&type=section&id=1.%20Basis%20of%20Presentation) - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions, not including all annual financial statement footnotes[23](index=23&type=chunk) [2. Significant Accounting Policies](index=9&type=section&id=2.%20Significant%20Accounting%20Policies) - Management's estimates for financial statements include allowances for credit losses, intangible assets, contract assets/liabilities, right-of-use assets, lease liabilities, and insurance/tax reserves[24](index=24&type=chunk) - Papa John's Marketing Fund, Inc. (PJMF) is consolidated as a variable interest entity (VIE) due to the Company's control over its significant activities[25](index=25&type=chunk) Allowance for Credit Losses (March 27, 2022) | (in thousands) | Accounts Receivable (in thousands) | Notes Receivable (in thousands) | | :--------------------------------- | :--------------------------------- | :------------------------------ | | Balance at December 26, 2021 | $2,364 | $1,500 | | Current period provision for expected credit losses | $2,613 | $12,560 | | Balance at March 27, 2022 | $4,851 | $14,054 | - The Company recorded **$14.6 million** in one-time, non-cash reserves for certain accounts and notes receivable, primarily linked to a master franchisee with operations in Russia[38](index=38&type=chunk) [3. Leases](index=14&type=section&id=3.%20Leases) - The Company subleases approximately 430 restaurant properties to franchisees in the UK, generating **$3.0 million** in sublease income for Q1 2022[39](index=39&type=chunk) - Contingent liability for assigned property leases is **$10.8 million** as of March 27, 2022, and an additional **$1.6 million** for 12 domestic leases post-quarter refranchising[40](index=40&type=chunk)[41](index=41&type=chunk) Supplemental Cash Flow Information Related to Leases (Three Months Ended) | (in thousands) | March 27, 2022 (in thousands) | March 28, 2021 (in thousands) | | :------------------------------------------------- | :---------------------------- | :---------------------------- | | Operating cash flows from finance leases | $262 | $278 | | Financing cash flows from finance leases | $1,241 | $1,059 | | Operating cash flows from operating leases | $9,612 | $9,483 | | Right-of-use assets obtained (new finance lease liabilities) | $569 | $7,014 | | Right-of-use assets obtained (new operating lease liabilities) | $20,801 | $28,428 | | Cash received from sublease income | $3,092 | $2,987 | [4. Papa John's Marketing Fund, Inc.](index=16&type=section&id=4.%20Papa%20John's%20Marketing%20Fund,%20Inc.) - PJMF collects a percentage of revenues from domestic Company-owned and franchised restaurants for advertising and promotional programs, reporting contributions and expenditures on a gross basis[45](index=45&type=chunk) PJMF Assets and Liabilities (in thousands) | (in thousands) | March 27, 2022 (in thousands) | December 26, 2021 (in thousands) | | :---------------------- | :---------------------------- | :------------------------------- | | Total Assets | $40,010 | $41,263 | | Total Liabilities | $43,720 | $47,091 | [5. Revenue Recognition](index=17&type=section&id=5.%20Revenue%20Recognition) - Contract liabilities, primarily franchise fees, unredeemed gift cards, and loyalty program obligations, totaled **$32.0 million** at March 27, 2022, a decrease of **$3.5 million** from December 26, 2021[47](index=47&type=chunk)[48](index=48&type=chunk) - The Company recognized **$9.3 million** in revenue from deferred revenue during Q1 2022[47](index=47&type=chunk) Estimated Future Revenue from Performance Obligations (in thousands) | Performance Obligations by Period | Less than 1 Year (in thousands) | 1-2 Years (in thousands) | 2-3 Years (in thousands) | 3-4 Years (in thousands) | 4-5 Years (in thousands) | Thereafter (in thousands) | Total (in thousands) | | :-------------------------------- | :------------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | :------------------------ | :------------------- | | Franchise fees | $2,011 | $1,783 | $1,601 | $1,390 | $1,127 | $2,134 | $10,046 | [6. Common Stock](index=17&type=section&id=6.%20Common%20Stock) - The Company had **35.7 million** common shares outstanding at March 27, 2022, a slight decrease from **35.8 million** at December 26, 2021[52](index=52&type=chunk) Share Repurchase Activity (Three Months Ended) | (in thousands, except average price per share) | March 27, 2022 (in thousands) | March 28, 2021 (in thousands) | | :--------------------------------------------- | :---------------------------- | :---------------------------- | | Total Number of Shares Purchased | 301 | 15 | | Average Price Paid per Share | $108.76 | $84.63 | | Aggregate Cost of Shares Purchased | $32,709 | $1,267 | | Maximum Dollar Value Remaining | $392,091 | $71,031 | - The Board approved a **$425.0 million** share repurchase program on October 28, 2021, with **$369.1 million** remaining available as of April 29, 2022[53](index=53&type=chunk) - Dividends of **$12.6 million** (**$0.35 per share**) were recorded in Q1 2022, with a similar dividend declared for Q2 2022[55](index=55&type=chunk) [7. Earnings Per Share](index=20&type=section&id=7.%20Earnings%20Per%20Share) Earnings Per Common Share (Three Months Ended) | (in thousands, except per share data) | March 27, 2022 (in thousands) | March 28, 2021 (in thousands) | | :------------------------------------ | :---------------------------- | :---------------------------- | | Net income attributable to common shareholders | $10,434 | $27,113 | | Basic earnings per common share | $0.29 | $0.83 | | Diluted earnings per common share | $0.29 | $0.82 | - Diluted EPS decreased from **$0.82** in Q1 2021 to **$0.29** in Q1 2022, reflecting a significant decline in net income attributable to common shareholders[58](index=58&type=chunk) [8. Debt](index=21&type=section&id=8.%20Debt) Long-term Debt, Net (in thousands) | (in thousands) | March 27, 2022 (in thousands) | December 26, 2021 (in thousands) | | :-------------------------- | :---------------------------- | :------------------------------- | | Senior notes | $400,000 | $400,000 | | Revolving facilities | $137,000 | $90,000 | | Total long-term debt, net | $528,088 | $480,730 | - The Company's total outstanding debt increased to **$537.0 million** as of March 27, 2022, primarily due to increased borrowings on revolving facilities[61](index=61&type=chunk) - The Amended Credit Agreement provides a **$600.0 million** senior secured revolving credit facility, maturing September 14, 2026, with an accordion feature for up to **$500.0 million** additional capacity[65](index=65&type=chunk)[66](index=66&type=chunk) - The Company has interest rate swap agreements with a total notional value of **$350.0 million**, which were de-designated as cash flow hedges following the issuance of senior notes[72](index=72&type=chunk) [9. Commitments and Contingencies](index=24&type=section&id=9.%20Commitments%20and%20Contingencies) - The Company reached a settlement in principle for **$5.0 million** in the 'In re Papa John's Employee & Franchise Employee Antitrust Litigation' class action, subject to court approval[75](index=75&type=chunk) - No liability was recorded for the 'Durling et al v. Papa John's International, Inc.' lawsuit as of March 27, 2022, as a loss is not considered probable or reasonably estimable[76](index=76&type=chunk) [10. Divestitures and Impairment](index=26&type=section&id=10.%20Divestitures%20and%20Impairment) - On March 28, 2022, the Company refranchised its **51%** ownership in a 90-restaurant joint venture in Texas for **$14.0 million**, resulting in a one-time, non-cash charge of **$8.4 million**[78](index=78&type=chunk)[79](index=79&type=chunk) - An impairment loss of **$2.8 million** was recorded for reacquired franchise rights due to the financial and operational impact of the conflict in Ukraine[80](index=80&type=chunk) [11. Segment Information](index=27&type=section&id=11.%20Segment%20Information) - The Company operates four reportable segments: domestic Company-owned restaurants, North America franchising, North America commissaries, and international operations[82](index=82&type=chunk) Segment Revenues (Three Months Ended) | (In thousands) | March 27, 2022 (in thousands) | March 28, 2021 (in thousands) | | :---------------------------- | :---------------------------- | :---------------------------- | | Domestic Company-owned restaurants | $198,765 | $197,234 | | North America franchising | $34,268 | $32,715 | | North America commissaries | $209,679 | $184,878 | | International | $42,707 | $42,604 | | All others | $57,273 | $54,315 | | Total revenues | $542,692 | $511,746 | Segment Operating Income (Three Months Ended) | (In thousands) | March 27, 2022 (in thousands) | March 28, 2021 (in thousands) | | :---------------------------- | :---------------------------- | :---------------------------- | | Domestic Company-owned restaurants | $1,989 | $15,324 | | North America franchising | $32,137 | $30,443 | | North America commissaries | $9,334 | $9,713 | | International | $4,455 | $8,364 | | All others | $3,719 | $6,118 | | Total operating income | $14,435 | $46,862 | - Domestic Company-owned restaurants operating income significantly decreased due to an **$8.4 million** refranchising charge[87](index=87&type=chunk) - International operating income includes **$3.5 million** in one-time, non-cash reserves for accounts receivable and impairment of reacquired franchise rights[87](index=87&type=chunk) [Note 12. Related Party Transactions](index=30&type=section&id=Note%2012.%20Related%20Party%20Transactions) - The Company and PJMF entered into a new Endorsement Agreement with ABG-Shaq, LLC (affiliated with Shaquille O'Neal), effective March 15, 2022, for Mr. O'Neal's personal services and personality rights[90](index=90&type=chunk)[92](index=92&type=chunk) - Consideration includes **$5.625 million** in aggregate cash payments over three years, royalty fees for co-branded pizza sales, and a grant of **55,898** restricted stock units (RSUs) to Mr. O'Neal[93](index=93&type=chunk)[94](index=94&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of Papa John's financial condition and operational results for Q1 2022, covering key developments, sales trends, cost drivers, and special items [Overview](index=31&type=section&id=Overview) - As of March 27, 2022, Papa John's operated **5,524** restaurants globally, comprising **608** Company-owned and **4,916** franchised locations across 49 countries[95](index=95&type=chunk) - Revenues are primarily derived from Company-owned restaurant sales, franchise royalties, sales of franchise/development rights, and sales of food/paper products to franchisees[95](index=95&type=chunk) [Recent Developments and Trends](index=31&type=section&id=Recent%20Developments%20and%20Trends) - The launch of NY Style pizza in Q1 2022, combined with Epic Stuffed Crust, contributed to positive results, building on record Q1 sales from the prior year[96](index=96&type=chunk) - The Company aims for **280-320** net new restaurants globally in 2022 (approx. **5% growth**) and expects to open **1,400-1,800** net new restaurants worldwide by the end of 2025[97](index=97&type=chunk) - Papa John's suspended corporate operations and support for **188** franchised restaurants in Russia, resulting in **$17.4 million** in one-time, non-cash charges for reserves and impairments[100](index=100&type=chunk)[102](index=102&type=chunk) - Staffing challenges intensified in early 2022 due to the Omicron variant, impacting customer service and operations, leading the Company to invest in wages, bonuses, and college tuition programs[103](index=103&type=chunk) [Global Restaurant Sales Information](index=34&type=section&id=Global%20Restaurant%20Sales%20Information) Comparable Sales Growth (Three Months Ended) | Segment | March 27, 2022 | March 28, 2021 | | :---------------------------- | :------------- | :------------- | | Domestic Company-owned restaurants | (1.2%) | 23.3% | | North America franchised restaurants | 2.8% | 27.1% | | North America restaurants | 1.9% | 26.2% | | International restaurants | 0.8% | 23.2% | | Total comparable sales growth | 1.6% | 25.4% | System-wide Restaurant Sales Growth (Excluding Foreign Currency Impact) (Three Months Ended) | Segment | March 27, 2022 | March 28, 2021 | | :---------------------------- | :------------- | :------------- | | Domestic Company-owned restaurants | 0.8% | 22.2% | | North America franchised restaurants | 4.0% | 27.0% | | North America restaurants | 3.3% | 25.9% | | International restaurants | 11.6% | 28.9% | | Total global system-wide restaurant sales growth | 5.3% | 26.6% | - Total comparable sales growth was **1.6%** in Q1 2022, significantly lower than the **25.4%** growth in Q1 2021, reflecting a challenging comparison against a strong prior year[106](index=106&type=chunk) - International system-wide restaurant sales growth was **11.6%** (excluding foreign currency), driven by increases in comparable sales and equivalent units[106](index=106&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Consolidated Revenues (Three Months Ended) | Revenue Source (in thousands) | March 27, 2022 (in thousands) | March 28, 2021 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Domestic Company-owned restaurant sales | $198,765 | $197,234 | $1,531 | 0.78% | | North America franchise royalties and fees | $34,268 | $32,715 | $1,553 | 4.75% | | North America commissary revenues | $209,679 | $184,878 | $24,801 | 13.41% | | International revenues | $34,617 | $34,607 | $10 | 0.03% | | Other revenues | $65,363 | $62,312 | $3,051 | 4.90% | | Total revenues | $542,692 | $511,746 | $30,946 | 6.05% | - Consolidated revenues increased by **6.0%** to **$542.7 million**, primarily driven by a **13.4%** increase in North America commissary revenues due to higher commodity pricing[110](index=110&type=chunk)[114](index=114&type=chunk) Operating Costs as a Percentage of Related Revenues (Three Months Ended) | Cost Category | March 27, 2022 | March 28, 2021 | Increase (Decrease) | | :------------------------------------ | :------------- | :------------- | :------------------ | | Domestic Company-owned restaurant expenses | 81.3% | 79.0% | 2.3% | | North America commissary expenses | 94.0% | 92.3% | 1.7% | | International expenses | 57.5% | 56.7% | 0.8% | | Other expenses | 92.6% | 89.6% | 3.0% | | General and administrative expenses | 12.1% | 9.8% | 2.3% | - Total costs and expenses increased by **4.5%** as a percentage of revenues, primarily due to higher labor and food costs in Company-owned restaurants and increased commodity costs in commissaries[118](index=118&type=chunk)[119](index=119&type=chunk) - General and administrative expenses increased by **$15.9 million**, or **31.8%**, primarily due to **$14.6 million** in one-time, non-cash provisions related to the Ukraine conflict and a **$5.0 million** legal settlement charge[122](index=122&type=chunk)[123](index=123&type=chunk) [Items Impacting Comparability; Non-GAAP Measures](index=43&type=section&id=Items%20Impacting%20Comparability%3B%20Non-GAAP%20Measures) Reconciliation of GAAP to Adjusted Financial Results (Three Months Ended) | (In thousands, except per share amounts) | March 27, 2022 (in thousands) | March 28, 2021 (in thousands) | | :--------------------------------------- | :---------------------------- | :---------------------------- | | GAAP operating income | $14,435 | $46,862 | | Refranchising and impairment loss | $25,796 | — | | Legal settlement | $5,000 | — | | Strategic corporate reorganization costs | — | $3,883 | | Adjusted operating income | $45,231 | $50,745 | | GAAP diluted earnings per common share | $0.29 | $0.82 | | Adjusted diluted earnings per common share | $0.95 | $0.91 | - Adjusted diluted EPS increased by **$0.04** to **$0.95** in Q1 2022, excluding special items such as refranchising losses, impairment losses, and legal settlement charges[134](index=134&type=chunk)[139](index=139&type=chunk) - Special items for Q1 2022 totaled **$30.8 million** pre-tax, including an **$8.4 million** refranchising loss, **$17.4 million** in reserves/impairments related to Ukraine, and a **$5.0 million** legal settlement[126](index=126&type=chunk)[141](index=141&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) Cash Flow Summary (Three Months Ended) | Cash Flow Activity (in thousands) | March 27, 2022 (in thousands) | March 28, 2021 (in thousands) | | :---------------------------------------- | :---------------------------- | :---------------------------- | | Operating activities | $25,394 | $63,217 | | Investing activities | $(8,315) | $(6,299) | | Financing activities | $(6,787) | $(16,080) | | Change in cash and cash equivalents (excl. FX) | $10,292 | $40,838 | - Cash flow from operating activities decreased by **$37.8 million**, primarily due to unfavorable working capital changes[144](index=144&type=chunk) - Total outstanding debt was **$537.0 million** as of March 27, 2022, with **$463.0 million** remaining availability under the PJI Revolving Facility[147](index=147&type=chunk) Financial Covenants Compliance (March 27, 2022) | Covenant | Permitted Ratio | Actual Ratio as of March 27, 2022 | | :-------------------- | :---------------- | :-------------------------------- | | Leverage ratio | Not to exceed 5.25 to 1.0 | 2.2 to 1.0 | | Interest coverage ratio | Not less than 2.00 to 1.0 | 4.8 to 1.0 | Free Cash Flow (Three Months Ended) | (in thousands) | March 27, 2022 (in thousands) | March 28, 2021 (in thousands) | | :-------------------------------------- | :---------------------------- | :---------------------------- | | Net cash provided by operating activities | $25,394 | $63,217 | | Purchases of property and equipment | $(10,233) | $(7,076) | | Dividends paid to preferred stockholders | — | $(3,412) | | Free cash flow | $15,161 | $52,729 | [Forward-Looking Statements](index=50&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements regarding business performance, revenue, earnings, unit growth, and other financial measures, subject to various risks and uncertainties[161](index=161&type=chunk) - Key risks include managing difficulties from the coronavirus pandemic, labor shortages, increased food and labor costs due to inflation and supply chain disruptions[161](index=161&type=chunk) - Other risks involve potential delays in new store openings, cyber-attacks, competitive pricing, changes in consumer preferences, and increased risks from international operations, including the conflict in Ukraine[161](index=161&type=chunk)[165](index=165&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details the Company's exposure to market risks, including interest rate, foreign currency, and commodity price risks, outlining strategies and impacts [Interest Rate Risk](index=53&type=section&id=Interest%20Rate%20Risk) - The Company is exposed to interest rate changes on its PJI Revolving Facility and uses interest rate swaps to minimize this risk, though these swaps were de-designated as cash flow hedges in Q3 2021[166](index=166&type=chunk) [Foreign Currency Exchange Rate Risk](index=53&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Risk) - Foreign currency fluctuations unfavorably impacted International revenues by approximately **$1.2 million** and operating income by **$0.6 million** in Q1 2022[168](index=168&type=chunk) - International operations, primarily distribution sales and royalties from franchised restaurants outside the US and Canada, accounted for **6-7%** of total revenues[167](index=167&type=chunk) [Commodity Price Risk](index=53&type=section&id=Commodity%20Price%20Risk) - The Company is exposed to commodity price volatility, particularly for cheese, its largest food cost item, despite having some forward pricing agreements[169](index=169&type=chunk) Average Block Price for Cheese (Actual and Projected) | Quarter | 2022 Projected Block Price | 2021 Actual Block Price | | :-------- | :------------------------- | :---------------------- | | Quarter 1 | $1.966 | $1.676 | | Quarter 2 | $2.352 | $1.680 | | Quarter 3 | $2.374 | $1.676 | | Quarter 4 | $2.318 | $1.786 | | Full Year | $2.253 | $1.705 | - Projected average block price for cheese in 2022 is significantly higher than 2021, with the full-year estimate at **$2.253** compared to **$1.705**[171](index=171&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures, reporting no material changes in internal control over financial reporting during the quarter - The Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 27, 2022[172](index=172&type=chunk) - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[173](index=173&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) Incorporates by reference legal proceedings detailed in Note 9 of the financial statements, covering ongoing lawsuits and claims - The Company is involved in various lawsuits, claims, and investigations, with accruals made where appropriate, as detailed in Note 9 of the financial statements[174](index=174&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, highlighting new or materially changed risks related to the global economy, the Ukraine conflict, and its impact on costs and supply chains - The ongoing conflict between Russia and Ukraine poses a new material risk, impacting the global economy, increasing costs for transportation, energy, and commodities[176](index=176&type=chunk)[179](index=179&type=chunk) - The Company has suspended corporate support for its master franchisee in Russia, and all related assets have been fully reserved or impaired, with no expected further financial charges[178](index=178&type=chunk) - Further escalation of geopolitical tensions could lead to cyberattacks, supply disruptions, lower consumer demand, and changes to foreign exchange rates, exacerbating existing risks[179](index=179&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the Company's share repurchase activities and use of proceeds, including the ongoing share repurchase program and shares acquired for tax withholdings - The Company repurchased **301,000** shares at an aggregate cost of **$32.7 million** during Q1 2022 under its **$425.0 million** share repurchase program[181](index=181&type=chunk) - Approximately **$369.1 million** remained available under the share repurchase program as of April 29, 2022, with an additional **223,000** shares acquired post-quarter for **$23.0 million**[182](index=182&type=chunk) - The Company acquired approximately **69,000** shares from employees to satisfy minimum tax withholding obligations related to equity award issuances[183](index=183&type=chunk) [Item 6. Exhibits](index=58&type=section&id=Item%206.%20Exhibits) Lists the exhibits filed with the Form 10-Q, including amendments to employment agreements, endorsement agreements, certifications, and financial statements in iXBRL format - Exhibit 10.1: Amendment to Employment Agreement with Robert Lynch[185](index=185&type=chunk) - Exhibit 10.2: Endorsement Agreement with ABG-Shaq, LLC (Shaquille O'Neal)[185](index=185&type=chunk) - Exhibits 31.1, 31.2, 32.1, 32.2: Certifications of CEO and CFO under Sarbanes-Oxley Act[185](index=185&type=chunk) - Exhibit 101: Financial statements in iXBRL format[185](index=185&type=chunk)

Financial Data and Key Metrics Changes - Papa John's system-wide sales reached $4.9 billion, up 15.4% in constant currency, with comparable sales increasing by 11.8% in North America and 13% internationally [5][7] - Adjusted EPS reached an all-time high of $3.51 per diluted share, a 150% increase year-over-year [7][35] - Operating income rose over 85% versus 2020, with adjusted operating margins increasing almost 250 basis points [7][32] Business Line Data and Key Metrics Changes - AUVs in North America grew 12% year-over-year, exceeding $1.1 million [6] - Digital sales represented over 75% of domestic sales, up more than 300 basis points from 2020 [12][13] - The company opened 250 net new restaurants in 2021, representing 4.5% unit growth [16] Market Data and Key Metrics Changes - North America comparable sales rose 11.1%, while international comparable sales increased by 2.4% [9] - The company experienced strong demand despite staffing challenges and supply chain issues [20][22] Company Strategy and Development Direction - The company aims to accelerate development from 250 net units in 2021 to between 260 and 300 in 2022 [30][45] - Partnerships with third-party delivery aggregators have been crucial for driving sales and managing labor shortages [14][107] - The focus on premium product innovation and targeted pricing actions is expected to protect margins amid inflation [26][100] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining positive comparable sales growth despite staffing challenges related to Omicron [28][54] - The company anticipates labor market improvements but acknowledges ongoing tightness [22] - The outlook for 2022 remains strong, with expectations for sustained positive comparable sales growth [29][47] Other Important Information - The company received multiple workplace recognitions, including being listed in Forbes' World's Best Employers [24] - Significant capital expenditures were made to enhance long-term growth drivers, including technology and new store development [37][38] Q&A Session Summary Question: Will operating margins hold flat for 2022? - Management believes they can hold margins flat for the full year despite expected headwinds from inflation and staffing challenges [52] Question: How has labor staffing challenges impacted sales trends? - Staffing issues were temporary and driven by Omicron, with confidence in recovering staffing levels [54] Question: Were there delays in restaurant construction due to supply chain issues? - Equipment challenges impacted U.S. company restaurants but did not affect international development [57] Question: What is the outlook for international comp performance? - International comp performance was strong, with two-year stacks comparable to domestic business [58] Question: How is the company managing supply chain and ingredient availability? - The supply chain is functioning well, with no current issues regarding ingredient availability [63] Question: What is the expected growth in domestic unit openings? - The company expects to return to historical levels of domestic unit growth as development agreements are in place [68] Question: How is the company leveraging third-party delivery aggregators? - Partnerships with aggregators have been beneficial for customer acquisition and managing staffing challenges [107] Question: What is the company's strategy for maintaining margins? - The strategy includes leveraging product innovation and pricing power to mitigate inflation impacts [100]

Part I [Business](index=4&type=section&id=Item%201.%20Business) Papa John's operates and franchises over 5,650 global pizza restaurants, emphasizing quality, technology, and expansion through segmented operations - As of December 26, 2021, Papa John's had **5,650** restaurants in operation across **50** countries and territories, comprising **600** Company-owned and **5,050** franchised locations[8](index=8&type=chunk) - The company's strategy centers on its "BETTER INGREDIENTS. BETTER PIZZA.®" promise, leveraging technology like the Papa Rewards loyalty program, and expanding its global footprint through significant franchisee partnerships[9](index=9&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk) - Major development deals announced in 2021 include opening **100** new locations in Texas and the South by 2029, over **220** restaurants across Latin America and Europe by 2025, and over **1,350** new stores in South China by 2040[12](index=12&type=chunk) Restaurant Unit Progression (2020-2021) | | Domestic Company-owned | North America Franchised | International Franchised | System-wide Total | | :--- | :--- | :--- | :--- | :--- | | **Beginning (Dec 27, 2020)** | 588 | 2,701 | 2,111 | 5,400 | | **Opened** | 11 | 74 | 304 | 389 | | **Closed** | 0 | (35) | (104) | (139) | | **Ending (Dec 26, 2021)** | 600 | 2,739 | 2,311 | 5,650 | | **Net Unit Growth** | 12 | 38 | 200 | 250 | - As of December 26, 2021, the company employed approximately **14,000** people, with an estimated **115,000** total individuals in the entire Papa John's system, including franchisees and their employees[39](index=39&type=chunk)[40](index=40&type=chunk) [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces industry, company-specific, debt, and general risks, including COVID-19 impacts, competition, and supply chain dependencies - The COVID-19 pandemic poses ongoing risks, including potential for new government restrictions, supply chain interruptions, and labor shortages, with no expectation to maintain the same high level of sales growth experienced during the pandemic[63](index=63&type=chunk)[65](index=65&type=chunk) - The QSR pizza industry is highly competitive, and the company's "BETTER INGREDIENTS. BETTER PIZZA.®" strategy may result in higher costs and lower margins compared to competitors focused on lower-cost options[66](index=66&type=chunk)[69](index=69&type=chunk) - The franchise model presents risks, as the company's success relies on the financial health and cooperation of independent franchisees, with poor franchisee performance potentially leading to store closures and reduced royalty payments[80](index=80&type=chunk)[81](index=81&type=chunk) - The company is dependent on Leprino Foods as its sole supplier for mozzarella cheese domestically and substantially all of its mozzarella cheese internationally, creating a significant supply chain risk[107](index=107&type=chunk) - The company's substantial debt of **$490.0 million** as of year-end could increase vulnerability to economic changes, limit flexibility, and require a significant portion of cash flow for debt service[114](index=114&type=chunk)[116](index=116&type=chunk) - Failure to maintain the integrity of customer and internal data against cyber-attacks could result in reputational damage, loss of sales, litigation, and significant costs[131](index=131&type=chunk) [Unresolved Staff Comments](index=40&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[140](index=140&type=chunk) [Properties](index=41&type=section&id=Item%202.%20Properties) Papa John's operates 5,650 restaurants globally, primarily leased, and owns its Louisville corporate office while leasing its Atlanta office Restaurant Locations by Region (as of Dec 26, 2021) | Region | Company-owned | Franchised | Total | | :--- | :--- | :--- | :--- | | **Total U.S.** | 600 | 2,564 | 3,164 | | **Canada** | — | 175 | 175 | | **Total North America** | 600 | 2,739 | 3,339 | | **International** | — | 2,311 | 2,311 | | **Worldwide Total** | 600 | 5,050 | 5,650 | - Most Company-owned restaurants are in leased spaces, typically with initial five-year terms and renewal options, and the company also leases and subleases approximately **425** restaurant sites to franchisees in the UK[145](index=145&type=chunk)[147](index=147&type=chunk) - The company owns its Louisville, KY corporate office and its UK office and QC Center, while leasing its new Atlanta, GA corporate office and nine of its **12** North American QC Centers[146](index=146&type=chunk) [Legal Proceedings](index=44&type=section&id=Item%203.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from Note 19 of the Consolidated Financial Statements - The company refers to Note **19** for details on legal proceedings[148](index=148&type=chunk) [Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports no applicable mine safety disclosures for its operations - None[149](index=149&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=48&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq, with **$72.5 million** in 2021 share repurchases and a declared Q1 2022 dividend - On October 28, 2021, the Board approved a new share repurchase program for up to **$425.0 million** of common stock[166](index=166&type=chunk) 2021 Share Repurchase Summary | Metric | Value | | :--- | :--- | | **Shares Repurchased** | ~594,000 | | **Aggregate Cost (Millions USD)** | $72.5 | | **Average Price per Share (USD)** | $121.96 | - A first-quarter 2022 dividend of **$0.35** per share was declared on January 27, 2022[164](index=164&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2021 saw significant revenue and operating income growth, driven by strong comparable sales and strategic capital realignment - The company delivered its tenth consecutive quarter of system-wide sales growth, with two-year comparable sales increases of **29.4%** in North America and **25.6%** internationally[176](index=176&type=chunk) - The company executed a capital allocation strategy in 2021, including a **$425.0 million** share repurchase program, issuing **$400.0 million** in senior notes, refinancing its credit facility, and repurchasing all Series B Preferred Stock[177](index=177&type=chunk) - The company incurred approximately **$13.1 million** in one-time corporate reorganization costs in 2021 related to the opening of its new Atlanta office[182](index=182&type=chunk) FY 2021 vs. FY 2020 Key Financials | Metric | FY 2021 | FY 2020 | % Change | | :--- | :--- | :--- | :--- | | **Total Revenues (Billions USD)** | $2.07 | $1.81 | +14.1% | | **Operating Income (Millions USD)** | $168.2 | $90.3 | +86.4% | | **Income Before Taxes (Millions USD)** | $150.9 | $75.4 | +100.3% | | **Diluted EPS (GAAP) (USD)** | $0.12 | $1.28 | -90.6%¹ | | **Adjusted Diluted EPS (USD)** | $3.51 | $1.40 | +150.7% | - ¹GAAP Diluted EPS in 2021 was significantly impacted by a **$3.10** per share reduction related to the one-time cash payment for the repurchase and conversion of Series B Preferred Stock[223](index=223&type=chunk) [Results of Operations](index=59&type=section&id=Results%20of%20Operations) Fiscal 2021 consolidated revenues increased **14.1%** to **$2.07 billion**, with operating income rising to **$168.2 million** due to strong comparable sales Revenue Growth by Segment (2021 vs 2020) | Segment | 2021 Revenue (Millions USD) | 2020 Revenue (Millions USD) | % Change | | :--- | :--- | :--- | :--- | | Domestic Company-owned | $778.3 | $700.8 | +11.1% | | North America Franchise Royalties | $129.3 | $96.7 | +33.7% | | North America Commissary | $761.3 | $680.8 | +11.8% | | International | $150.8 | $124.0 | +21.6% | | **Total Revenues** | **$2,068.4** | **$1,813.2** | **+14.1%** | Comparable Sales Growth (2021 vs 2020) | Segment | 2021 | 2020 | | :--- | :--- | :--- | | North America Restaurants | 11.8% | 17.6% | | International Restaurants | 13.0% | 12.6% | | **Total** | **12.1%** | **16.3%** | - Operating income increased by **$78.0 million**, driven by higher profits from increased sales, a higher effective royalty rate in North America, and leveraging fixed costs across segments[216](index=216&type=chunk)[224](index=224&type=chunk) [Liquidity and Capital Resources](index=69&type=section&id=Liquidity%20and%20Capital%20Resources) In 2021, the company generated **$184.7 million** in operating cash, implemented a new capital structure, and ended with **$490.0 million** total debt Cash Flow Summary (in millions) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | **Operating Activities** | $184.7 | $186.4 | | **Investing Activities** | ($63.5) | ($41.1) | | **Financing Activities** | ($180.5) | ($43.5) | - In September 2021, the company issued **$400.0 million** of **3.875%** senior notes due 2029 and entered into a new **$600.0 million** revolving credit facility maturing in 2026[236](index=236&type=chunk)[404](index=404&type=chunk)[408](index=408&type=chunk) - Total debt outstanding at year-end was **$490.0 million**, comprised of **$400.0 million** in senior notes and **$90.0 million** drawn on the revolving facility[238](index=238&type=chunk)[403](index=403&type=chunk) - Free cash flow, a non-GAAP measure, was **$109.7 million** in 2021, down from **$137.1 million** in 2020, primarily due to higher capital expenditures[251](index=251&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=79&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rates, foreign currency, and commodity prices, with cheese price volatility being a primary concern - A **10%** adverse change in foreign currency exchange rates would negatively impact annual revenue by approximately **$15.6 million** and operating income by **$3.3 million**[263](index=263&type=chunk) Average Cheese Block Price per Pound (USD) | Year | Q1 | Q2 | Q3 | Q4 | Full Year | | :--- | :--- | :--- | :--- | :--- | :--- | | **2021 (Actual)** | $1.676 | $1.680 | $1.676 | $1.786 | $1.705 | | **2020 (Actual)** | $1.857 | $1.679 | $2.262 | $2.235 | $2.008 | | **2022 (Projected)** | $1.956 | $2.088 | $2.095 | $2.031 | $2.043 | [Financial Statements and Supplementary Data](index=81&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for fiscal 2021, including the auditor's report and detailed financial notes - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the consolidated financial statements and on the effectiveness of the company's internal control over financial reporting[269](index=269&type=chunk)[270](index=270&type=chunk) - Critical Audit Matters identified by the auditor were the measurement and valuation of insurance reserves and the allowance for credit losses for franchisee notes receivable, due to the significant judgments and estimates involved[273](index=273&type=chunk)[275](index=275&type=chunk)[279](index=279&type=chunk) Consolidated Balance Sheet Summary (in thousands) | | Dec 26, 2021 | Dec 27, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $255,009 | $306,407 | | **Total Assets** | $885,704 | $872,770 | | **Total Current Liabilities** | $287,424 | $288,869 | | **Total Liabilities** | $1,052,664 | $881,334 | | **Total Stockholders' Deficit** | ($172,458) | ($266,939) | [Controls and Procedures](index=144&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 26, 2021 - The CEO and CFO concluded that the Company's disclosure controls and procedures are effective as of the end of the fiscal year[469](index=469&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 26, 2021, based on the COSO 2013 framework[471](index=471&type=chunk) - No changes in internal control over financial reporting occurred during the fourth quarter that materially affected, or are likely to materially affect, these controls[473](index=473&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=148&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the definitive proxy statement - Detailed information on directors, executive officers, and corporate governance is incorporated by reference from the Company's definitive proxy statement[487](index=487&type=chunk) [Executive Compensation](index=148&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the company's definitive proxy statement - Detailed information on executive compensation is incorporated by reference from the Company's definitive proxy statement[489](index=489&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=148&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details securities authorized under equity compensation plans as of December 26, 2021, with further ownership in the proxy statement Equity Compensation Plan Information (as of Dec 26, 2021) | Plan Category | Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price (USD) | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | **Approved by security holders** | 319,045 | $54.65 | 4,264,031 | | **Not approved by security holders** | 138,060 | N/A | N/A | Part IV [Exhibits, Financial Statement Schedules](index=150&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements from Item 8 and indexes all exhibits filed with the Form 10-K, including corporate governance and debt agreements - This section provides a list of all financial statements filed with the report and an index of exhibits, including key agreements such as the Indenture for the senior notes and the Amended Credit Agreement[497](index=497&type=chunk)[501](index=501&type=chunk)[503](index=503&type=chunk)

Papa John's International, Inc. (NASDAQ:PZZA) Q3 2021 Earnings Conference Call November 4, 2021 8:00 AM ET Company Participants Steve Coke – Senior Vice President of Financial Operations, Accounting, and Reporting Rob Lynch – President and Chief Executive Officer Ann Gugino – Chief Financial Officer Conference Call Participants Alex Slagle – Jefferies Eric Gonzalez – KeyBanc Capital Markets Peter Saleh – BTIG Lauren Silberman – Credit Suisse Dennis Geiger – UBS Alton Stump – Loop Capital Brian Mullan – Deut ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements show significant revenue and operating income growth, with balance sheet changes driven by new debt issuance and the elimination of preferred stock [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Balance Sheet Items (In thousands) | Sep 26, 2021 | Dec 27, 2020 | | :--- | :--- | :--- | | Total current assets | $271,760 | $306,407 | | Total assets | $889,954 | $872,770 | | Total current liabilities | $318,119 | $288,869 | | Long-term debt, less current portion, net | $414,915 | $328,292 | | Total liabilities | $1,019,469 | $881,334 | | Series B Convertible Preferred Stock | $0 | $251,901 | | Total stockholders' deficit | ($137,046) | ($266,939) | - The company's balance sheet shows the complete elimination of the **Series B Convertible Preferred Stock**, which was valued at **$251.9 million** at the end of 2020, accompanied by an increase in long-term debt[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric (In thousands, except EPS) | Q3 2021 | Q3 2020 | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | $512,782 | $472,941 | +8.4% | | Operating income | $38,577 | $24,549 | +57.1% | | Net income attributable to Company | $29,256 | $15,708 | +86.2% | | Diluted earnings per common share | $0.79 | $0.35 | +125.7% | | Metric (In thousands, except EPS) | 9 Months 2021 | 9 Months 2020 | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | $1,539,536 | $1,343,423 | +14.6% | | Operating income | $130,076 | $70,555 | +84.4% | | Net income attributable to Company | $95,393 | $44,765 | +113.1% | | Diluted earnings (loss) per common share | ($0.59) | $0.99 | N/A | - For the nine months ended September 26, 2021, the company reported a **net loss attributable to common shareholders of $20.4 million**, resulting in a **diluted loss per share of ($0.59)**, primarily due to a **$109.9 million deemed dividend** on the redemption of Series B Convertible Preferred Stock[12](index=12&type=chunk)[58](index=58&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity (In thousands) | 9 Months Ended Sep 26, 2021 | 9 Months Ended Sep 27, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $193,624 | $168,547 | | Net cash used in investing activities | ($41,191) | ($28,588) | | Net cash used in financing activities | ($177,058) | ($27,437) | | Change in cash and cash equivalents | ($24,391) | $112,139 | - Financing activities for the nine months ended September 26, 2021, were primarily driven by the issuance of **$400.0 million in senior notes** and the repayment of a **$340.0 million term loan**, alongside a significant **$188.6 million cash outflow** for the repurchase of Series B Convertible Preferred Stock[26](index=26&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - In Q2 2021, the company repurchased all outstanding Series B Preferred Stock for **$188.6 million**, resulting in a **$109.9 million deemed dividend** that reduced net income attributable to common shareholders[58](index=58&type=chunk) - In September 2021, the company issued **$400.0 million of 3.875% senior notes** due 2029 and entered into a new **$600.0 million revolving credit facility** to repay previous borrowings[70](index=70&type=chunk)[76](index=76&type=chunk)[84](index=84&type=chunk) - The company expects to incur total one-time corporate reorganization costs of **$17.0 to $20.0 million** through 2021 related to its new Atlanta office, with **$15.3 million** incurred to date[91](index=91&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) System-wide sales growth continued for the ninth consecutive quarter, driven by strong comparable sales, though management notes staffing challenges amid strong demand [Overview and Recent Developments](index=35&type=section&id=Overview%20and%20Recent%20Developments) - The company achieved its ninth consecutive quarter of system-wide sales growth, with two-year comparable sales of **+30.7% in North America** and **+29.0% internationally** for Q3[104](index=104&type=chunk) - Key capital allocation initiatives in 2021 include issuing **$400.0 million in senior notes**, refinancing the credit facility, and announcing a new **$425.0 million share repurchase program**[105](index=105&type=chunk) - The company's delivery and carryout model has led to strong demand, but it faces challenges in attracting and retaining hourly employees in a competitive job market[106](index=106&type=chunk) [Global Restaurant Sales Information](index=38&type=section&id=Global%20Restaurant%20Sales%20Information) | Comparable Sales Growth | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | North America restaurants | 6.9% | 23.8% | | International restaurants | 8.3% | 20.7% | | **Total** | **7.3%** | **23.0%** | - The company saw net unit growth of **46 restaurants in Q3 2021** and **169 restaurants** for the nine months ended September 26, 2021, reaching a total of **5,569 restaurants** worldwide[104](index=104&type=chunk)[113](index=113&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) - Consolidated revenues increased **8.4% to $512.8 million** in Q3 2021, driven by positive comparable sales and higher North America franchise royalties[117](index=117&type=chunk)[119](index=119&type=chunk) - Operating income as a percentage of revenue improved from **5.2% in Q3 2020 to 7.5% in Q3 2021**, primarily due to sales leverage and improved margins[115](index=115&type=chunk) - Adjusted diluted EPS for Q3 2021 was **$0.83**, compared to $0.35 in the prior year, while nine-month GAAP results were heavily impacted by the Series B Preferred Stock repurchase[140](index=140&type=chunk)[145](index=145&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 26, 2021, the company had **$425.0 million in outstanding debt** and approximately **$572.3 million available for borrowing** under its revolving facility[147](index=147&type=chunk) | Free Cash Flow (Non-GAAP, In thousands) | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $193,624 | $168,547 | | Purchases of property and equipment | ($41,328) | ($24,269) | | Dividends paid to preferred stockholders | ($6,394) | ($10,237) | | **Free cash flow** | **$145,902** | **$134,041** | - The Board of Directors declared a fourth-quarter dividend of **$0.35 per common share**, payable in November 2021[156](index=156&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks from interest rates, foreign currency, and commodities, with specific exposures in its variable-rate debt and international revenues - The company is exposed to interest rate changes on its PJI Revolving Facility, which it attempts to minimize using interest rate swaps that were recently de-designated as hedges[167](index=167&type=chunk) - Operations outside the U.S., accounting for approximately **7% of revenues**, expose the company to foreign currency fluctuations, which had a favorable impact of **$7.9 million** on revenues for the nine-month period[168](index=168&type=chunk)[169](index=169&type=chunk) - The company faces commodity price risk for food and paper products, with cheese being the largest single food cost, and is subject to market volatility despite some forward pricing agreements[170](index=170&type=chunk) [Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls during the third quarter of 2021 - The CEO and CFO concluded that as of September 26, 2021, the company's disclosure controls and procedures were **effective**[172](index=172&type=chunk) - No changes were made to the company's internal control over financial reporting during the most recent fiscal quarter that have materially affected or are likely to materially affect such controls[173](index=173&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, including a collective action lawsuit concerning delivery driver expense reimbursement, for which no loss has been recorded - The company is defending a conditionally certified collective action lawsuit (Durling et al v. Papa John's International, Inc) and has not recorded any liability as it does not believe a loss is probable or reasonably estimable[89](index=89&type=chunk)[174](index=174&type=chunk) [Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - There have been **no material changes** to the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 27, 2020[175](index=175&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=62&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company continued its share repurchase program in Q3 and subsequently received board approval for a new, larger $425.0 million repurchase authorization - Under its **$75.0 million share repurchase program**, the company repurchased **103,000 shares in Q3 2021**, with approximately **$31.9 million** remaining available under this authorization as of October 29, 2021[176](index=176&type=chunk)[177](index=177&type=chunk) - On October 28, 2021, the Board of Directors approved a new share repurchase program authorizing the company to buy back up to **$425.0 million** of its common stock[178](index=178&type=chunk) [Exhibits](index=63&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including agreements for new senior notes and credit facilities, along with required officer certifications - Key exhibits filed with this report include the Indenture for the **3.875% Senior Notes due 2029** and the **Amended and Restated Credit Agreement** dated September 14, 2021[180](index=180&type=chunk)

Papa John's International, Inc. (NASDAQ:PZZA) Q2 2021 Earnings Conference Call August 5, 2021 8:00 AM ET Company Participants Steve Coke - Senior Vice President, Financial Operations, Accounting and Reporting Rob Lynch - President and CEO Ann Gugino - CFO Conference Call Participants Alex Slagle - Jefferies Eric Gonzalez - KeyBanc Peter Saleh - BTIG Lauren Silberman - Credit Suisse Alton Stump - Longbow Research Dennis Geiger - UBS Brian Mullan - Deutsche Bank Brett Levy - MKM Partners Patrick Keeley - Stif ...